Fiserv (FISV) Q4 2005 earnings summary

Executive summary

• Record 2005 revenue reached $4.06B, up 9% YoY; operating income rose 13% to $745.4M.

• Organic revenue growth was 7%; Financial segment organic growth accelerated to 6% from 3%, while client satisfaction increased across businesses.

• Eight acquisitions expanded lending, banking, insurance and health plan capabilities; 2006 priorities were profitable growth, margin management and investment in high-growth areas.

Financial highlights

• Total revenue was $4,059.5M, up 9%; processing and services revenue rose 6% to $2,891.6M and product revenue rose 18% to $1,167.9M.

• Reported net income was $516.4M vs. $377.6M; diluted EPS was $2.70 vs. $1.91.

• Highlighted adjusted results were net income of $440M and EPS of $2.30, excluding an $86.8M pre-tax investment gain, a $26.3M contract termination fee and $5.7M of one-time tax benefits.

• Operating income increased 13% to $745.4M; total expenses rose 8% to $3,314.1M.

• Operating cash flow from continuing operations was $597.1M, down 14%; free cash flow was $432.2M vs. $537.3M.

Outlook and guidance

• 2006 strategy targets profitable growth through organic revenue gains and solid margin management, strong cash generation, strategic acquisitions and investment in differentiating growth areas.

• 2006 effective tax rate was expected to be 38.7%; adoption of SFAS 123R was estimated to add $0.09–$0.11 per share in compensation expense.

• Cash flow and available funding were expected to cover 2006 operating needs, debt repayments, acquisition contingencies and ordinary capital spending; significant acquisitions could require added borrowing or securities issuance.